I have never been on a board of directors before. I was elected and have many questions. One item that came up at our first meeting, concerned who would have signing authority. How do we get signing authority, and how many board members should have this responsibility?
Congratulations on your new role and giving of your time to your community. Yes, you will have many questions. We are here to help.
According to the Business Dictionary, signing authority is “the legal power delegated by an authoritative body (such as a board of directors) to organizational positions (such as president, managing director, manager) appointing them as agents of the organization for general or specific purposes (such as payment authority, revenue authority, spending authority).”
Having been elected to the board of directors, you may have signing authority by virtue of the position you hold. This will occur when your governing documents, usually the bylaws, specifically name who will have signing authority. For example, where corporations elect individuals to specific roles, it may state that the president, secretary, and treasurer shall have signing authority.
If the bylaws are silent on the matter, at its first meeting, board members should pass a resolution naming which positions have signing authority. The board may assign the power to any position, or pass a resolution giving all members of the board the authority to sign on behalf of the corporation. Naturally, this must be recorded in the meeting minutes.
This brings up the number of signatories a condo corporation should have. There is no magic number but having one signatory only is discouraged since it does not provide enough security. One unscrupulous person could sign for unbudgeted items or provide for themselves. By the time the fraud is discovered, it may be too late to reverse. A more suitable arrangement is to have three board members with signing authority and require two signatures for any document endorsed on behalf of the condo corporation. The number of signatures required may be stated in the bylaws, established by board resolution or by a board policy. Whatever works best for your situation to provide appropriate checks and balances.
As long as board members act honestly, and within their scope of authority, you should have no fear of signing documents for the corporation.
Tip: It is important to remember that whenever you elect a new board, certain contacts must be notified officially (e.g. bank,) that previous board members no longer hold signing privileges and inform them of the new signing officers. All the best.